Outlook 2025: Buoyant sheep prices prompt more slaughtering

In contrast to recent years when the UK breeding flock increased, December 2023 survey data reported a 4.3% decline to 13.8m head. This is the lowest figure since the current data series began in 1996.

Record high lamb prices in the first two quarters of 2024 resulted in many ewe lambs intended for breeding being slaughtered, says Andersons director David Siddle.

In addition, high cull ewe prices look to be resulting in many younger ewes going for slaughter, where in previous years they would have been sold for breeding.

A further fall in the breeding flock looks likely going into 2025.

Production to fall further 

The AHDB is forecasting a 2.9% decline in UK sheepmeat production for 2024 compared with 2023. A reduced carryover of lambs from 2023 meant supplies were tight running up to Easter.

A smaller crop of new-season lambs, due to poor weather at lambing and the reduced breeding flock, saw that trend continue.

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A further factor supporting prices has been declining EU production. This is forecast to fall by about 5% for 2024. The UK exports about 30% of its total sheepmeat production, of which 95% goes to the EU.

New Zealand and Australian supplies appear tighter at present and prices are rising. This lessens the attractiveness of these exports to our own and EU markets.

The focus for these countries for now remains on supplying the Chinese market.

For 2025, price prospects remain positive. Reduced output is likely to more than offset the effects of high product prices to the consumer, and the long-term reducing trend in consumption.

The importance of the Halal market, both at home and abroad, continues to grow. Halal meat now accounts for about 30% of UK lamb sales and is a major factor underpinning prices.

There appear good opportunities for farmers, processors and retailers to further develop this market.   

Unlike dairy and pig enterprises, total cost of production data is hard to find in the sheep sector.

However, Andersons estimates that efficient and productive sheep flocks selling lambs through the summer and autumn period might have total costs of production of about 235p/kg liveweight, compared with market prices of perhaps 300p/kg.

This suggests a positive margin from production, which historically has not always been there. Committed producers will hopefully be in for a further year of good returns in 2025.

There are opportunities for expansion and, in some cases, for new entrants via joint ventures with arable businesses who are looking to incorporate grass back into their rotations or who are considering winter grazing of combinable crops as part of a more regenerative approach.

Despite record sheep prices, net margins from such ventures are not huge and such arrangements need to be carefully structured if they are to last.

The production of sheepmeat has closely mirrored the changes in the national flock.

This suggests that there has been little productivity improvement in the sector over the past decade – that is, each ewe is delivering the same weight of lamb to market as it did 30 to 40 years ago.

This is in marked contrast to most of the other main sectors of agriculture.

The best producers continue to reduce their reliance on concentrate feeds and are looking to make more use of forage, often by adopting modern grazing techniques such as rotational grazing or deferred grazing, and perhaps by incorporating grazed winter fodder or arable cover crops.

We are seeing more use being made of legumes and less use of inorganic fertiliser, which in England can go hand-in-hand with the Sustainable Farming Incentive.